Manufactured home loans are one way to grow your wealth through finally become a home owner. You can purchase or refinance a manufactured home, its land or both in a similar way to how you would do so with a traditional home. It is important to remember that despite the similarities, both the types of homes themselves and the manufactured home loans used to finance them are different from traditional homes.
Home Ownership is Required
One of the major differences between manufactured home loans and those for most types of houses is that a manufactured home may not be used as a rental property under regulations. This rule prevents the loans from being abused by unscrupulous landlords who would finance massive numbers of manufactured homes and defer maintenance until they became squalid. Your owner occupancy is required due to the increased risk that the lender takes on, as manufactured homes tend not to wear as well as traditionally built homes do.
The Federal Housing Administration has a requirement known as Title I, which declares that lenders approved by the FHA make loans from company funds to borrowers who are eligible for these loans. Lending criteria are reasonably standard across lenders, with the ability to repay the loan and general financial past being major contributing factors to whether the lender will issue the loan in question. By definition, Title I loans are neither grants nor government loans, but are private in nature.
Title I ensures that the loan issued will be a fixed rate loan of up to 20 years. The fixed rate requirement is necessary to ensure fairness on the lender’s part and protect less financially savvy borrowers. For manufactured homes with multiple sections, the maximum term of the loan becomes 25 years, while for the lot that the home sits upon the maximum loan term is 15 years. The guarantees on the lender’s side are matched by the guarantee on the borrower’s side.
The federal government encourages home ownership, even among borrowers who may be less capable of supporting a long-term mortgage. Because of this, under Title I the FHA ensures many manufactured home loans against the possibility of a borrower default. If the borrower becomes unable to make their monthly payments at some point, the lender will be made whole on the amount borrowed. This facilitates a lower interest rate that many borrowers find considerably easier to afford than they would most other types of loans, including traditional mortgages. This is also beneficial for borrowers with blemishes on their credit record, as they can borrow at a level that they may not be able to otherwise.
Requirements for Manufactured Home Loans
A manufactured home loan carries a hot of requirements. Structurally, the home must be at least 400 square feet in size. This eliminates many of the smaller and higher risk homes. As well, the manufactured home must be permanently affixed to a foundation that is approved of by the Department of Housing and Urban Development. The manufactured home must be titled as real estate under the local government instead of as personal property.
Under most circumstances, in order to finance or refinance your manufactured home, you must also own the land under the home. However, in a manufactured home community you may get past this regulation through having the required foundation. In this way, you may lease the land while still owning the home and finance it as you normally would.
Financing your manufactured home is a good way to home ownership. Follow the requirements, and you can secure a favorable interest rate.